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LONDON, May 12,
2006 (RFE/RL) -- Oil-prospecting activities in
Kurdish-administered (northern Iraq) Kurdistan are
gathering pace following a Norwegian company's
discovery of new oil reserves there, while other
small international oil firms from Canada and
Britain have also become involved. Still, despite
the optimism of the firms, some experts say security
concerns and legal uncertainties remain brakes on
development.
With the Kurdish north markedly safer than most
other parts of Iraq, smaller international petroleum
companies are becoming increasingly interested in
prospecting for oil there. While the oil giants
still hesitate, some Norwegian, Canadian, and
British firms are already there and expressing
increasing optimism.
Possibly New Oil Fields
Helge Eide, managing director of DNO of Oslo,
Norway, says the company has been active in the
Kurdish-administered region for some time and
already has found new oil reserves. He said the
company's first well, Tawke No 1, is now getting
ready to start test-producing oil.
"We are progressing with our early test-production
plan with the objective to start test production [in
the] first quarter of next year," Eide said.
Eide added that the area is close to the Turkish
border, some 300 kilometers from Kirkuk, and does
not appear to be part of the long-established Kirkuk
or Mosul oil fields. He said this makes the find
even more exciting. "This is a complete new area,
where there have been very limited -- if any at all
-- exploration activities," he noted. "So this is
definitely a complete new prospect, and if we can
confirm commercial oil volumes, it will be
characterized as a complete[ly] new field."
Other oil companies are also getting increasingly
interested. One is Heritage Oil from Canada. It has
already signed two memorandums of understanding with
Kurdish regional authorities for an area comprising
some 1,300 square kilometers. Production-sharing
agreements are currently in the final stages of
negotiation as well.
"We are already working in terms of the normal tasks
that are to be expected in the initial stages, which
are the geological field surveys, all the
preliminary assessments that are necessary to define
what is going to be the exploration program,"
Heritage chairman and chief executive Micael
Gulbenkian said.
Legal Gray Area
Experts agree that the prospects for new oil finds
seem good. But some are worried about the legal
framework and validity of the granted licenses.
Catherine Hunter, a senior analyst with Global
Insight in London, said it is not yet clear whether
the regional licenses would also be recognized by
the central government in Baghdad. This is because
the new Iraqi Constitution appears to many observers
to give some licensing rights to both governments.
"That's not entirely clear from the actual wording
of the constitution itself, and that's why again, we
are seeing very small prospective companies in that
region, rather than the major oil companies who are
likely to wait for a more certain regulatory climate
before they go in there," Hunter said.
Oilman Eide said, however, that he is counting on
the Kurdish regional administration remaining a
self-governing power in the region. So, he said, his
company is not worried. "We believe that the
political development and the constitutional
arrangement now, which provides for such agreements
to be signed, it was a right decision for us to do
that," he said.
Analyst Hunter cautions that despite the
as-yet-unknown extent of the Kirkuk oil fields and
the possible significant untapped deposits further
north, the Kurds may be overestimating their total
potential reserves. She said the total estimates of
some 45 billion barrels put forward by the regional
administration may be too high and prompted, at
least in part, by the administration's desire to
attract investors.
Still, whatever the total reserves turn out to be,
the Kurdistan authorities' optimism seems to be
bringing in more, newly interested oil companies.
Most recently, Sterling Energy, the first company
from Britain, has been granted an exploration
license in the region, too.
DNO's Eide said he welcomes the competition. "It's
positive that other companies now are also starting
operations up there," he said. "OK, we were very
early and we have been progressing very well with
the seismic and drilling, but I think in general
it's positive that other companies now are entering
this area."
That is because the oil companies must not only
weigh the possibility of getting returns from their
drilling but also the security risks of doing
business in Iraq. And the presence of more companies
can only reassure the early arrivals that their
calculations in choosing to work in the
Kurdish-administered region were right.
Rferl org
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